How to Start and Succeed in Your Recruitment AgencyWritten by Bernard on June 01, 2017
According to the Recruitment & Employment Confederation‘s 9th annual report, the recruitment agency industry in the UK is now worth £35.1 billion per year.
There are presently more than 9,500 recruitment agencies in the UK that have an annual turnover greater than £250,000.
This is particularly great news for new and emerging recruitment agencies, as there is obviously a market for their services.
The top 3 recruitment sectors for permanent placements were technical/engineer, professional/managerial and secretarial/clerical. What this means is that more recruiters will be moving towards those directions in order to increase their revenues.
But with Brexit looming over the horizon, more and more businesses will be wondering about the future of their industry. Luckily, that’s about 2 years away, and 2 years is enough time for you to establish your business and get a foothold in the market.
If you’ve ever considered starting your own recruitment agency, now would be a great time to start.
That’s why today we’ll look at all the aspects you need to consider and the steps you need to take to get started on your own successful recruitment agency.
Table of Contents
I. The Advantages and Disadvantages
Getting started with your own recruitment agency will result in a lot of fantastic, lucrative aspects.
However, you should also understand that there are a lot of pitfalls that come with starting any business, including a recruitment agency.
1. The advantages of starting your recruitment agency
Of course, these are the most important parts of setting up your recruitment agency—all the great benefits you’ll get. Let’s look at the most important ones.
You’ll be your own boss
This one is a primary advantage for anyone starting a business, including a recruitment agency. When you have your own business, you will have the freedom to determine how you spend your time and who you work with.
It’s a great sense of freedom that you are actually in charge of your own life, fully, and that you can (and will) make sure you succeed.
You’ll have lots of flexibility
Related to the above point: with your own company, you’ll also have lots of flexibility when it comes to the direction of your company. You can be creative, revolutionary, a trend-setter in the recruiting niche.
Especially in the beginning of your business, you’ll have greater room for flexibility because you’ll be able to switch to a different direction easily.
You can make great money
Let’s not forget one of the best parts of starting a recruitment agency: you’ll have a great income potential. You can make lots of money in the recruiting industry, especially the way that fees and prices are set up.
We’ll go over the best pricing strategy for your recruitment agency later, but just be sure that with the correct business strategy, you can stand to earn a lot.
You’ll have lots of fun challenges
Another fantastic part of the recruitment agency business is that you’ll be facing a lot of challenges. Many would look upon this as something negative, but in fact it is very positive.
This makes for a very dynamic, interesting and exciting working environment, one where you should be on your toes and being two steps ahead of the competition.
2. The disadvantages of starting your recruitment agency
Of course, every coin has two sides, and every advantage will have a similar disadvantage. Let’s look at the most important disadvantages of starting your recruitment agency.
You’ll have all the responsibility
While you will have the enjoyment of freedom of having your own business, you’ll also have all the responsibility of having your own business.
This means all the strategy, business planning, marketing and every other single decision will be up to you. If you succeed, it’s all your victory, but if you fail, it’s also all yours.
You’ll have lots of competition
Although starting a recruitment agency takes a lot of time and energy, it also has the potential to bring in lots of money.
For that reason, you’ll likely face a lot of competition in your area, which will affect your prices, revenues and so much more.
It will be tough the first few months
As with any business, the hardest period will always be the first few months. This is the time in which you’ll find your feet and get your customers, but there will be many difficult financial and motivational times.
Long working hours and evening work
Lastly, prepare yourself for a lot of late nights and extended working hours. This includes working on Saturdays or even missing some important family events.
It might mean you’ll have to put off your vacation time or spend your holidays nearby if you need to get back quickly.
While this is exciting in the first few weeks or months, it can get draining after that, especially during the difficult growing period in the beginning.
II. The Basics of Your Recruitment Agency
When you’re setting up your recruitment agency, you may be inspired to start thinking ahead to your prices, marketing, blog and all that.
While all of those are important to ensure your business success, we will still need to start at the beginning. Let’s look at the basics for your recruitment agency.
Your Recruitment Agency Business Plan
There have been many rumors going around that businesses no longer need to have a business plan in order to truly be effective.
This egregious idea is based on the one simple, but refutable, idea that business plans are outward-facing: they’re only for getting funding from investors.
While that is a function of business plans, it isn’t the only aspect. In fact, the biggest aspect of your business plan is that it is inward-facing.
It is there for you to get your business idea on paper, and for your employees to understand so that you’re all on the same page.
With these advantages, you can see how important business plans are. In order to do it correctly, though, you will need to understand the basic aspects every business plan will need to have, regardless of length.
- Your Executive Summary, which requires you to list all your business’ strengths. Because this covers the entire business plan, it is recommended that (although it comes first) it should be done last.
- Your Business Description, which helps to describe the most crucial aspects of your business
- The Industry & Competition Overview, which helps you to show off all the research that you’ve done on the recruitment agency industry, including its growth, competitors and trends
- Your Operations & Management Plan, which will list what the daily operations of your business will be. It will also describe how the management will be structured, and how the operations and management will work together to accomplish your business goals
- Your Service Description, which is where you describe what the competitive benefits of your business are compared to your competitors
- Your Marketing Strategy, which will detail how you’ll get your recruitment agency services in front of the right clients at the right time. How will you make sure your price, distribution, promotion and sales channel work together effectively?
- Your Financial Projections, which will reveal the kinds of revenues and expenses that your recruitment agency will have for a specific period (for example, a year). It will also list whether your business will need funding to meet its regular obligations.
And that’s it. We understand how difficult starting your own business plan can be, and how much in-depth information you really need in order to get started.
That’s why we’ve created our own epic business plan guide, coming in at more than 8,000 words.
III. The Qualifications, Licenses and Insurance You’ll Need
In order to get started on your business, you’ll need to take care of all the legal aspects first.
Let’s see what qualifications, licenses and insurance you’ll need for your recruitment agency.
It is important to understand that most recruiters don’t need to have a great amount of certification. In fact, they just need a basic bachelor’s degree to get in the door.
It is even better for you to have a degree in the type of recruiting you’ll be doing, whether it’s IT, medical, engineering or anything else.
However, the most important part is to have the right types of skills in whatever way you get them.
In order to start and succeed in your recruitment agency, you should have the following:
- exemplary interpersonal and communication skills
- great sales and negotiation skills
- a goal-orientated work approach
- an ability to adequately handle multiple priorities
- the ability to solve problems efficiently
- the ability to regularly meet deadlines and hit targets
- the confidence and self-motivation to succeed
- organizational and time management skills
- creativity and team-working skills
In addition to that list of skills, you should also enjoy working in a high-pressure environment on a regular basis and accept (and enjoy) all the responsibility that will comes with that.
In order to start a recruitment agency, there are luckily not too many requirements that you have to meet.
However, in the UK there are certain licenses that will be needed if you are supplying specific types of workers. These include:
- shellfish gathering
- food processing and packaging.
These listed above will require being licensed by the Gangmasters Licensing Authority.
Licensing will also be required in the UK for nursing and domiciliary care recruitment agencies.
When you’re finding adequate, competent workers for other companies, it may seem like a pretty easy, clean endeavor.
However, there’s always a risk with any business, and it’s no different for any recruitment agency.
That’s why you’ll need these important insurance types in order to cover your recruitment agency as best you can.
Professional Indemnity Insurance
This type of insurance is particularly important for your line of work. Professional indemnity insurance helps to address the legal costs if someone (your client, for example) files a claim against you.
Professional indemnity insurance will meet compensation payments that come as a result of negligent advice on your part or negligent services.
Public Liability Insurance
Public liability insurance is always one recommended for all types of businesses.
This insurance helps protect your recruitment agency against any legal proceedings that could arise if a member of the public is injured due to negligence from your company.
This also covers cases where the client’s property is damaged due to negligence.
Employers Liability Insurance
Lastly, you have the type of insurance that is inward-facing: employers liability insurance.
This type of insurance covers the compensation costs if one of your employees get injured or sick while working on anything business-related.
In the UK, all businesses are required to have minimum £5 million employers liability insurance.
IV. Your Recruitment Agency Prices
Let’s get down to the nitty-gritty of your recruitment agency business: how much you should be charging.
Of course, when you’re starting a recruitment agency you’ll be generally looking to be competitive on pricing until you get a good foothold into the market.
The charges should always take into consideration the following:
- your location
- your experience
- the quality of your services
- the speed and results you can deliver
- the level of competition in your area or niche
Beyond that, it is often difficult to decide how much a recruitment agency should be charging its clients. There are two important aspects to consider as well when deciding on your fees.
1. Fee arrangement
When you are looking to set the fee structure for your clients, you should remember to always adapt your structures for each position the client is seeking to fill.
Essentially, you should always take into consideration:
- what type of position you’re asked to fill (for example, is it a secretary or back-end developer?)
- the seniority of the position (is it a junior assistant or a CFO?)
- the time and urgency for the position to be filled
- the ease and ability to find suitable candidates for the position (for example, it is easier to find a secretary than to find a particle physicist)
Each of these factors will determine how much you charge for your recruitment services.
2. Types of fees
There are certain legalities related to the types of fees you can charge, and when you can charge it.
These fees are up to the recruitment agency to decide. However, if you are providing short-term or long-term contract with your client, you need to first of all clarify the fee structure.
There are, as a rule, three main areas for agency fees:
These fees are associated with finding temporary workers for a particular position. This is usually based on a percentage of the yearly salary.
For many recruitment agencies, the typical percentage charge is 10% – 20% of the annual salary (although 25% is most common with hard-to-fill positions).
For those clients looking to fill a permanent contract (for at least a year), they need to be charged on a permanent contract fee.
This is normally higher than the temporary fees. It can go anywhere from 17.5% to 25%, where the higher percentage charge is for hard-to-fill positions.
V. Getting Your First Recruitment Agency Clients
What would a business be without its customers? The only way you can establish and grow your business is by getting a steady supply of clients that will pay you to find the best candidates for them.
Let’s look at the best ways you can find your customers in our modern, digital world.
1. Get your website up and running
It may seem like I’m preaching to the choir in 2017, but if you have a business—any business at all—you need to have a website for it.
Unfortunately, you’ll be surprised by how many recruitment agencies there are out there that don’t actively promote or invest in their websites.
In order to attract potential clients to your business, you need to attract them first on the internet. They will need somewhere to go, and your website seems like a natural landing place.
2. Start blogging
In order to sell to a specific group of people, you need to educate them on what they really need to succeed, and how you can help them get what they need.
Therefore, you need to dedicate your time and energy into creating a blog that is filled with valuable content your audience desires.
Not only that, a blog will help engage your audience and move you up the search results page.
3. Send out newsletters
When you’ve done your inbound marketing right (your blog and website), then you need to start turning those website visitors into subscribers.
Once you have your subscribers, you can start sending out regular newsletters and emails to them about important events, company information, blog posts and much more.
What you’re trying to do is build up trust and loyalty between your recruitment agency and the potential clients.
When they trust you and see that you can help them in their business, they will convert into a buyer.
4. Use social media effectively
The keyword here is not to use social media, but to use it effectively. There are far too many examples of lazy businesses simply getting on social media, but never really doing much of anything with it.
Of course, one of the great benefits of using social media is that it’s absolutely free. You don’t need to pay a penny (unless you want to for ads), but it will require a lot of time and energy until you get it right.
Get The Ultimate Guide to Social Media for Small Businesses and Freelancers to improve your social media strategy.
The recruitment agency industry can be very lucrative if you set your business up right. In order to get a great idea of the business, you should first look at the advantages:
- you’ll be your own boss with lots of flexibility
- you’ll stand a chance to make great money
- you’ll have lots of fun challenges
Besides those benefits, it’s best not to forget the pitfalls:
- you’ll have all the responsibility
- you’ll also have lots of competition
- your first few months could be quite difficult
- you’ll have long working hours
Before we look at anything else, it’s important to go over the basic business plan that you’ll need.
After that, you should make sure you have the right qualifications and skills, as well as the appropriate licenses.
You must also have the proper insurance, which includes:
- professional indemnity insurance
- public liability insurance
- employers liability insurance
You should be quite strategic when you’re setting your recruitment agency prices. Make sure you:
- adapt the fee arrangement according to the position your client is hoping to fill
- understand the different fees for either temporary or permanent positions
In order to get your first recruitment agency clients, just make sure you:
- create an attractive, interesting website
- start a blog
- send out newsletters regularly
- use social media effectively
With these tips, you should be set for having your recruitment agency succeed in every way.
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